2026–27 Federal Budget: What it could mean for businesses, investors and individuals

Read time: 8 min
Published Tuesday 12th May 2026

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If you run a business, own or are considering buying investment property, use a trust, employ staff or claim work-related deductions, several 2026–27 Federal Budget measures are worth reviewing before making tax, investment or cash flow decisions.

The Budget was delivered by Treasurer Jim Chalmers on 12 May 2026 and is framed around “resilience and reform”. The official Budget site highlights six main themes: fuel supply and security, cost of living, productivity, tax reform, care and opportunity, and security and investment.

For most Australians, the important question is practical:

What could this change, when does it start, and what should be reviewed before decisions are made?

Some measures are proposed to apply from 1 July 2026, others from 1 July 2027 or 1 July 2028, so timing will matter.

Key numbers at a glance

1. For small businesses

1a. Permanent $20,000 instant asset write-off

The Government has announced that the $20,000 instant asset write-off will be made permanent from 1 July 2026.

Small businesses with turnover up to $10 million will be able to immediately deduct eligible assets costing less than $20,000. The Government estimates this will improve small business cash flow by around $890 million over five years and save small businesses around $32 million per year in compliance costs.

Why this matters

This affects the timing of deductions for eligible assets. It does not make the asset free, and it does not mean every purchase is commercially worthwhile.

It may be relevant for businesses buying or considering buying:

• tools
• equipment
• technology
• machinery
• eligible business assets costing less than $20,000

Practical example

If an eligible small business buys an asset for $18,000, the instant asset write-off may allow the business to deduct the full cost in the year the asset is first used or installed ready for use, rather than depreciating it over time.

That may reduce taxable income for that year. The actual tax effect will depend on the business structure, taxable income, timing and eligibility.

What to review

Before buying assets, business owners should check:

• whether the asset is genuinely needed
• whether it will be installed and ready for use in the right income year
• whether the business has the cash flow to support the purchase
• whether finance costs affect the commercial benefit
• whether the deduction timing helps the business
• whether multiple assets are being purchased close together

Review before acting: accountant review recommended.

1b. PAYG instalment flexibility

The Budget proposes more flexibility for businesses managing pay as you go (PAYG) instalments.

From 1 July 2027, businesses will be able to opt in to monthly PAYG instalments. This is intended to help businesses better align tax payments with current trading conditions.

Why this matters

This may improve cash flow management for businesses where profit changes during the year.

It may be especially relevant where income or margins are affected by:

• fuel costs
• freight costs
• project delays
• seasonal trading
• late customer payments
• supply chain disruptions

What to review

Businesses should review whether current PAYG instalments still reflect current trading conditions.

If profit has fallen, margins have tightened or costs have increased, instalment settings may need attention.

1c. Less red tape, but not less responsibility

The Government says its productivity package will reduce regulatory costs by $10.2 billion per year. The Budget site also highlights small business tax-time simplification and broader red tape reduction as key business measures.

Why this matters

This may reduce some administration over time, but it does not remove core compliance obligations.

Businesses still need to manage:

• payroll
• superannuation
• business activity statements
• tax lodgements
• record keeping
• employee obligations
• Australian Taxation Office (ATO) correspondence

What to review

Business owners should keep reviewing:

• payroll systems
• superannuation processes
• business activity statement preparation
• bookkeeping workflows
• software integrations
• internal approval processes

 

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2. For companies and start-ups

2a. Two-year loss carry-back for eligible companies

The Government is reintroducing loss carry-back rules.

From 2026–27, eligible companies that make a loss in the current income year will be able to use that loss to claim a refund against tax paid in the prior two income years.

According to the Budget, the measure will apply to companies with turnover up to $1 billion, is expected to benefit up to 85,000 businesses, and is expected to cost the Budget $2.3 billion over five years.

Why this matters

This may improve cash flow for eligible companies by allowing some current-year losses to be applied against tax paid in the previous two income years.

It may be relevant where a company:

• invests in equipment
• has a difficult trading year
• experiences margin pressure
• has a major project delay
• has a temporary downturn
• is expanding and carrying higher costs

What to review

Companies should review:

• taxable profits in the previous two income years
• current-year trading performance
• expected taxable income or loss
• planned asset purchases
• tax instalments
• cash flow forecasts

Review before acting: accountant review recommended.

2b. Loss refundability for start-ups

From 2028–29, small start-ups in their first two years of operation will be able to receive a refund for tax losses, capped at the value of fringe benefits tax and withholding tax paid on employee wages.

News coverage reports that the start-up refund measure is expected to cost $410 million.

Why this matters

Start-ups often invest before they become profitable. This measure may support cash flow for early-stage companies that are employing people and incurring losses.

What to review

Start-ups and early-stage companies should review:

• company structure
• wage payments
• pay as you go withholding
• fringe benefits tax exposure
• early trading losses
• expected funding needs
• eligibility timing

 

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3. For businesses exposed to fuel, freight and supply chains

Fuel security and supply chain measures

The Budget responds to higher fuel prices and supply concerns with major fuel security measures.

ABC reports that more than $10 billion will be spent strengthening Australia’s fuel security, including a 1 billion litre government-owned emergency fuel reserve for diesel and jet fuel. It also reports that minimum stockholding obligations are expected to increase by around 10 days, giving at least 50 days of supply for jet fuel and diesel, and 37 days for petrol.

The official Budget site also lists fuel and fertiliser security, interest-free loans for manufacturing and logistics businesses, and a 20% domestic gas reservation for Australians as key measures.

Why this matters

Fuel, freight and gas costs can affect margins quickly.

This is especially relevant for:

• transport and logistics businesses
• civil works businesses
• construction businesses
• manufacturing businesses
• food and wholesale businesses
• businesses with high fuel, freight, gas or input costs

What to review

Businesses should review:

• fuel assumptions in quotes and budgets
• freight costs
• supplier terms
• customer pricing
• gross margins
• contract escalation clauses
• cash flow buffers
• stock and inventory planning

Where fuel, freight or gas costs are material, businesses should avoid relying on last year’s cost assumptions.

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4. For property investors and landlords

Negative gearing limited to new builds from 1 July 2027

The Government proposes to limit negative gearing to new builds from 1 July 2027.

Budget material indicates that investment properties owned before Budget night will be exempt, while negative gearing will be limited to new builds for new purchases. Investors who buy existing homes after Budget night will still be able to deduct losses against residential property income and carry forward losses to future years.

Why this matters

For property investors buying or considering buying established residential property after Budget night, this may change when rental losses can be used.

The key change is not that rental losses disappear. The key change is that some losses may be quarantined and carried forward, rather than used to reduce wage, salary or other income in the same year.

Practical example

An investor buys an established residential property after Budget night and makes a $10,000 rental loss in a future year.

Under the proposed settings, that $10,000 loss may not be available to reduce salary or wage income in that year. Instead, it may need to be carried forward and used against future residential property income or residential property capital gains.

What to review

Property investors should review:

• whether the property is new or established
• contract date
• settlement timing
• expected rental income
• expected interest costs
• expected cash shortfall
• ability to carry losses forward
• impact on personal cash flow
• planned sale timing

Review before acting: accountant review strongly recommended before buying, selling or refinancing investment property.

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5. For investors: capital gains tax changes

This is one of the most important parts of the Budget for investors.

5a. 50% capital gains tax discount proposed to be replaced with inflation-based indexation

The Government proposes to replace the current 50% capital gains tax (CGT) discount with a discount based on inflation from 1 July 2027.

Under the current rules, eligible individuals and trusts can generally access a 50% CGT discount where an asset has been held for more than 12 months. Budget papers indicate that this discount is proposed to be replaced by inflation-based indexation, with the new rules applying only to gains made after 1 July 2027.

Why this matters

The current 50% CGT discount is relatively simple to understand. If an eligible individual or trust has held an asset for at least 12 months, only half of the capital gain is generally taxed.

The proposed indexation model is different. It adjusts for inflation and taxes the real gain.

This may produce a different outcome depending on:

• how long the asset has been held
• how much the asset has increased in value
• inflation over the ownership period
• the owner’s tax rate
• whether the asset is a new build
• whether transitional rules apply
• whether small business CGT concessions apply

Assets that may be affected

The CGT reform may be relevant to gains on assets such as:

• investment properties
• holiday homes
• shares
• crypto assets
• business assets
• collectibles
• long-held pre-CGT assets, for gains after 1 July 2027

The proposed rules will partially end the exemption for assets purchased before 1985, with gains made after 1 July 2027 subject to the new inflation-based rules.

What about self-managed superannuation funds?

Based on the current Budget material, the proposed capital gains tax reform appears to target the existing 50% CGT discount available to individuals and certain trusts. Complying superannuation funds, including self-managed superannuation funds, currently have a separate CGT treatment and may reduce eligible capital gains by 33.33%, rather than 50%.

On that basis, the announced CGT discount reform does not appear to directly change SMSF capital gains tax treatment. However, SMSF trustees should still seek advice before making investment or disposal decisions, particularly where assets are held across multiple structures or where other superannuation tax measures may apply.

What to review

Investors should review:

• assets with large unrealised gains
• expected sale timing
• whether a valuation may be needed
• ownership structure
• marginal tax rates
• eligibility for concessions
• whether selling before or after 1 July 2027 changes the outcome

Review before acting: accountant review strongly recommended.

5b. New 30% minimum tax on capital gains

The Government also proposes a 30% minimum tax on capital gains from 1 July 2027.

The Budget indicates that investors will pay at least 30% tax on gains under the proposed minimum rate, with pensioners and people on income support expected to be exempt.

Why this matters

This may affect individuals who were planning to sell assets in a low-income year to reduce tax on a capital gain.

For example, someone planning to sell an investment asset after retiring may need to revisit the timing if a 30% minimum tax could apply.

What to review

Before selling or planning to sell an asset, investors should consider:

• expected capital gain
• expected taxable income in the year of sale
• whether the gain relates to the period before or after 1 July 2027
• whether the 30% minimum tax could apply
• whether indexation changes the calculation
• whether any exemption or concession may apply

5c. Small business CGT concessions

The Budget material indicates the current small business capital gains tax (CGT) concessions will continue. However, business owners should obtain advice before selling, restructuring or transferring business assets, as the interaction between the new CGT rules, transitional arrangements and small business CGT concessions may be complex.

 

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6. For discretionary trusts and family groups

30% minimum tax on discretionary trusts from 1 July 2028

The Government proposes to introduce a 30% minimum tax on discretionary trusts from 1 July 2028, with some exceptions.

The Budget states that trustees will be required to pay the tax, beneficiaries will still need to declare income in their tax returns, and the measure is expected to raise $4.5 billion over the next four years.

Why this matters

Discretionary trusts are commonly used by family groups and private businesses. The proposed rules may affect how income is distributed and whether current structures remain appropriate.

This is not simply a rate change. It may affect:

• annual distribution planning
• family group structures
• business ownership
• asset ownership
• restructuring decisions
• succession planning

Rollover relief for restructuring

The Government says that small businesses and other taxpayers will have three years from 1 July 2027 to restructure out of discretionary trusts into companies or fixed trusts.

Exceptions

The minimum tax will not apply to certain trusts and income types, including:

• fixed trusts
• superannuation funds
• deceased estates
• charitable trusts
• primary production income of farms
• certain income relating to vulnerable young people

What to review

Family groups and businesses using or considering using discretionary trusts should review:

• current trust structure
• income distribution patterns
• beneficiary tax profiles
• asset ownership
• business succession plans
• whether restructuring relief may be relevant
• whether a company or fixed trust structure should be considered

Review before acting: accountant review strongly recommended. Do not restructure based on headlines alone.

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7. For employees and individual taxpayers

7a. $250 Working Australians Tax Offset

The Government is introducing a $250 Working Australians Tax Offset from 2027–28.

The Budget states that the offset will apply to more than 13 million working Australians, will only be offered to people who earn income from wages or salary rather than investments, and is expected to cost the Budget $6.4 billion over four years.

Why this matters

This is a cost-of-living measure, but most workers will not receive the benefit immediately.

The Budget indicates that people will not see the offset in their pocket until after July 2028.

What to review

Individuals should review:

• expected taxable income
• whether income is from wages or salary
• whether investment income is a major income source
• expected tax refund or payable position

7b. $1,000 instant tax deduction for workers

From the 2026–27 income year, workers will be able to claim an instant deduction of up to $1,000 for work-related expenses.

The Government says about 6.2 million workers, or 42% of taxpayers, are expected to benefit, with an average saving of $205.

Why this matters

This may make tax returns simpler for many workers.

However, individuals with work-related expenses above $1,000 may still need to claim using the usual method and keep appropriate records.

What to review

Individuals should keep records where:

• work-related expenses exceed $1,000
• they want to claim actual expenses
• they have deductions outside work-related expenses
• they are unsure whether an expense is deductible

 

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8. For home buyers and housing-related businesses

Housing infrastructure and first home buyer measures

The Budget includes $2 billion for local housing infrastructure to support up to 65,000 new homes. The official Budget site also states that housing reforms are intended to support an additional 75,000 homeowners.

The Government expects CGT and negative gearing changes to help 75,000 homes change hands from investors to first home buyers. It also reports that the infrastructure funding is expected to support 65,000 new homes, with a net impact of 30,000 extra homes after accounting for a projected reduction in housing supply from the tax changes.

Why this matters

This could matter for:

• first home buyers
• property investors
• builders
• civil works businesses
• trades
• developers
• transport and supply businesses linked to housing construction

What to review

Home buyers should review:

• eligibility for first home buyer support
• deposit requirements
• property caps
• timing
• borrowing capacity
• interaction with state-based concessions

Housing-related businesses should review:

• project pipeline
• council and infrastructure approvals
• demand for new builds
• labour and materials capacity
• cash flow and contract terms

 

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9. For employers and electric vehicle arrangements

Electric vehicle fringe benefits tax changes

The Government is changing electric vehicle fringe benefits tax (FBT) arrangements.

Winding back the electric vehicle discount is expected to save the Budget $1.7 billion over four years.

Why this matters

Employers offering or considering offering electric vehicles through salary packaging or employment arrangements may need to review the timing and cost impact.

What to review

Employers should review:

• existing electric vehicle arrangements
• vehicle cost
• arrangement start date
• fringe benefits tax exposure
• salary packaging settings
• employee communication

 

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10. What to review now

Business owners

Review:

• asset purchases planned before or after 1 July 2026
• PAYG instalments
• fuel and freight costs
• business cash flow
• company loss positions
• tax instalment settings
• business structure
• trust arrangements
• upcoming equipment purchases

Companies

Review:

• recent taxable profits
• expected current-year losses
• eligibility for loss carry-back
• tax paid in the prior two years
• asset write-off timing
• cash flow forecasts

Start-ups

Review:

• first two years of operation
• employee wages
• withholding tax
• fringe benefits tax
• expected tax losses
• funding needs

Property investors

Review:

• existing property holdings
• new versus established property purchases
• contract date and settlement date
• negative gearing assumptions
• carried-forward losses
• planned sale timing
• CGT exposure

Investors

Review:

• unrealised capital gains
• sale timing before or after 1 July 2027
• asset valuations
• ownership structure
• marginal tax rate
• eligibility for exemptions or concessions

Family groups and trusts

Review:

• discretionary trust distributions
• beneficiary tax profiles
• asset ownership
• succession plans
• restructuring options
• eligibility for rollover relief

Individuals

Review:

• eligibility for the $250 offset
• expected work-related expenses
• whether the $1,000 instant deduction is suitable
• whether actual deductions may be higher
• record keeping

 

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Final word

The 2026–27 Federal Budget includes practical measures that may help with cash flow, tax administration and cost-of-living pressure. It also includes major tax reforms that could affect investors, property owners, family groups and businesses using discretionary trusts.

The key points are:

• timing matters
• structure matters
• cash flow matters
• proposed tax changes may affect different taxpayers in different ways
• decisions should not be made from headlines alone

If any of these measures affect your business, investments, property plans or family structure, speak with your accountant before making decisions.

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Please note: For general information only. Outcomes depend on individual circumstances, superannuation structure, asset profile, and how the law applies to your position. This information is not personal financial advice.